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Operations Management Of Kellogg Company

Paper Type: Free Essay Subject: Marketing
Wordcount: 3693 words Published: 27th Apr 2017

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The Kellogg Company was established in 1906 as Battle Creek Toasted Corn Flake Company and produced the first batch of Kelloggs Corn Flakes. Today Kelloggs is one of the world’s leading cereal manufacturers and have manufacturing units in 18 countries and sold in 180 countries. The wide variety of food products offered by the company makes it the leader of health and nutrition market. The products are designed in such a way that it provides a balanced diet and meets the different tastes of the consumers(Kellogg’s, 2012).

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Operations management has a major role in all processes starting from the customer order to the delivery of the product or services achieving the customer satisfaction. The process of customer satisfaction involves the identification of the needs, design the product or service, procurement of inputs, transformation of inputs into output and delivery of the product. The operation management focuses on the design of products, procurement of inputs and transformation process, and the identification of needs and delivery of the products are the responsibility of the marketing team (Khanna, 2007).

The marketing team of Kellogg’s carries out extensive market research and identifies the potential consumer needs. This helps the company to expand the product portfolio and satisfy the consumers. The consumer needs identified by the marketing team are then analyzed by the operations management team and they design the product in such a way that best suits the consumer needs. The market research also helps to identify the future needs of the consumer, which helps the operations management team to design the new product (Stokes and Lomax, 2008).

The markets like breakfast cereals are well established and increasing the revenue is difficult task. The operations management team of the company helps to achieve it through designing the new products. However, designing the new products is time consuming and highly expensive. Hence the operations management team focuses more on the extensions of the existing products, which is less risky and less expensive compared to new product development. The brand extensions of the existing products help to attract the consumer by providing new features to the existing product (Stokes and Lomax, 2008).

After developing the prototype of product extensions and the packaging designs, Kellogg’s marketing team conducts another survey to measure the satisfaction level of the consumers. This survey helps the financial department to set the budgets. Theoperations management team uses the data collected from this survey to decide the operations strategy and organize the supply chain. Based on the operations strategy developed and the supply chain, operation management team also schedules the production. Thus operation management team of Kellogg’s plays an important role in the new product development and enhancing the revenue of Kellogg’s (Stokes and Lomax, 2008).

1)Customers and Operation Objectives of Kellogg’s

The successful business organisations are generally market oriented and provide excellent customer service. Customer is defined as the person who purchase and use the products or services of the organisation and is also called as client or buyer. The ability of the organisation to give the customers what they want is known as customer service. Providing the best customer service in order to meet the organisational objectives is known as customer focus (Fulton-Calkins, Rankin and Shumack, 2010).

The customers are broadly classified into two groups and are external customers and internal customers. The external customers include other people, organisations and government entities who purchase or use the products or services. Internal customers are the employees or departments of the organisation who avail the services or products of other employees of the organisation. An example for internal customers is the employees of the organisation who use the service of printing department of the organisation(Fulton-Calkins, Rankin and Shumack, 2010).

The external customers if not satisfied with the product or service will opt for another business and results in a decreased sales and profit for the organisation. Hence effective external customer service has to be in place to achieve customer satisfaction, customer loyalty and customer retention. Effective internal customer service can be obtained through developing a strong relationship among the managers, employees, associates and peers. Good internal customer service can result in employee satisfaction, employee loyalty and employee retention and hence an effective external customer service(Fulton-Calkins, Rankin and Shumack, 2010).

1.1) Customers of Kellogg’s

The consumers of Kellogg’s include all age group people above three years and the company developed around 39 different brands of cereals and many cereal bars. The elderly mainly focus on the calorie of the diet and the children are mainly interested in the taste of the food. Kellogg’s flexibility of their product meet these needs. They provide different flavours, which attracts the kids, promotes different recipes of their cereals and the products like Special K attracts the people who are health conscious. Kellogg’s is the one of the market leaders and are confident about their consumer as they deliver high quality products. In order to develop the business objectives the decision-takers of Kellogg’s created a public awareness and took part in certain debates about health and lifestyle. These helped them to better understand the concerns of the consumers(Kellogg’s, 2012).

1.2) Objectives of Kellogg’s

The business to become successful, the organisation must set specific objectives and aims and proper strategies must be in place. The organisations mainly uses a combination of many strategies like timely delivery of the products or services, flexibility in the product designs to meet the changing needs of the customers, quality of operations and lowest possible prices compared to the competitors (Panneerselvam, 2012).

The main objective of Kellogg’s is to deliver superior quality products which will deliver tasty and balanced nutrition. The packaging of the Kellogg’s product emphasize the importance of balanced diet and a healthy breakfast. The objectives of Kellogg’s are based on certain values like integrity, accountability, passion, humility, simplicity and success. The people in the company are accountable and focus on finding solutions faster. They actively participate in discussions and decision making where ever they are concerned. This helps in solving the issues at the earliest and delivering the products in time. Kellogg’s believe in providing positive, vitalizing and pleasing environment for the employees. This will help the employees deliver an excellent customer service (Kellogg’s, 2012).

Other objectives of Kellogg Company are growth of the business and expansion of its market.They also aims at sustainable growth and uses the recyclable materials for package. Though the prime objective is growth and profit, company also have corporate social responsibilities. They promote the importance of breakfast and physical activities (Kellogg’s, 2012).

1.3) Visions of Kellogg’s

The company support continuous learning and growth of the employees along with the growth of the company. They train their employees through coaching and feedback for better service. They respect the employees and make them feel valued. The company believe in simplifying the process continuously, which will make the understanding easier. The internal relationship in the company will be strong and there is no boundaries between different units. The employees of the organisation work as team without internal barriers. There exists a strong relationship between the different levels of the teams. The issues are discussed directly and openly(Kellogg’s, 2012).

The company values the competitors and never underestimates the competitors. They always learn from mistakes and the successes and gathers the honest feedback. The most important of all the objectives is to satisfy the customers and serve them high quality products and services. The variety of products and flexibility of their services attract many consumers. The company always strives to promote and protect the reputation(Kellogg’s, 2012).

Kellogg Company is secondary business sector, which obtains the wheat, corn, cocoa, rice and sugar from suppliers. These are then processed into wide variety of cereals and snacks. To obtain a persistent product quality, Kellogg Company keeps thorough quality checks throughout the process. The quality check begins at the selection of high quality raw materials from suppliers and carries out throughout the process by using various process control techniques. The quality of the packaging and the food packaged are also checked to ensure the freshness of the food (Kellogg’s, 2012).

1.4) Supply Chain Management of Kellogg’s

The chain of all processes and organisations that helps the organisation in delivering the product is known as supply chain and the design, execution and control of supply chain is known as supply chain management(Sinha and Kotzab, 2012).

To achieve the objectives, the company has to consider many things during the supply chain management.The manufacturing units should be located near to the suppliers of raw materials and the distribution channels so that the transportation charges will be less and the distribution of the products will be faster. Another important factor is the process of storing the packaged products until these are sold. The transport and storage of the products are important during the supply chain as it occurs between all stages of supply chain. Kellogg’s avails the services of transportation and storage companies which are experts in delivering the products intact at reduced cost(Hill and Jones, 2009).

With advanced technologies like computerised stocking and inventories Kellogg’s monitor the availability of the products in shelves and that the orders are delivered in time. The collaboration with the tertiary business sectors and just-in-time system helps to reduce the where-housing(Kellogg’s, 2012). The company aims to achieve these operational objectives in order to obtain stable growth and profit.

2) Role of Process in Achievement of Customer Satisfaction

Operations strategy is defined as developing the broad plans for competing with the larger organisation and involves the design of process and infrastructures to support the process. The process design involves the selection of proper technology, sizing the process, documentation of the process and reviewing the process (Chase et al., 2006).

In order to compete well in the market, the company should place a clear and detailed operations strategy in place. The most common methodology to develop the operations strategy is Hill methodology and involves five steps. These are defining the corporate objectives, develop marketing strategy to attain the objectives, assessment of competition, method to deliver the product and design the infrastructure to support the process (Greasley, 2007).

2.1) Process at Kellogg’s

The process of manufacturing the cereals at Kellogg’s adhere to strict quality standards. There exists strict quality control process right from the raw materials, through each stage of the manufacturing till the final product is manufactured. They ensure the packaging will keep the cereals fresh till it reaches the consumers. They develop newer technologies to ensure the quality like Waxtite wrappers to keep the cereals fresh for longer periods. Kellogg’s uses large scale equipments and automation in the manufacturing of each product. This is very useful and helps to reduce the cost of large scale manufacturing of the products. But the main disadvantage of this process is the wastage during the manufacturing for individual order. Kellogg’s overcome this by keeping products in stock. This also helps to reduce the time required to deliver the products(Boyer and Verma, 2009).

2.2) Factors Affecting Customer Satisfaction and Sales

Kellogg Company is one of the world’s largest producer of cereals and conveniencefoods. The sales of the company was around $12.4 billion in 2010 with the distribution in 180 countries. The most popular brands of the company are Keebler, Pop-Tarts, Eggo and Rice Krispies. But Kellogg Company faces the most tough time recently. The rising prices for several inputs like wheat, corn and the energies is the foremost challenge that the company faces. The rise in the price of the energies leads to the increased transportation and distribution charges. Another challenge that the company face is the strong competition from General Mills and Kraft in U.S. market. Due to the slowdown in U.S. economy, the consumers tries to reduce the expenses, which significantly affected the sales of Kellogg’s(REUTERS, 2013).

The company has increased the price of the products due to the increase in the price of inputs, which significantly affected the price sensitive market. However the promotion of healthy breakfast and balanced diet helps the company to maintain the sales, especially that of Special K. This helps the company to recover the sales, which was hurt from several years due to the extensive discounting and two major product withdrawals. Kellogg’s also taken steps to improve the supply chain to overcome these like intense quality checks for the raw materials (AutomatedTrader, 2013).

The company supports innovation and trains and educates the employees. They appreciates and compliments innovative ideas, which encourages and motivates the employees to develop innovative ideas. The company carries out extensive market research to analyse the changing needs of the consumers and the operation teams are involved in new product development and brand extensions. Since new product developments are highly expensive and time consuming, the team mainly focuses on product extensions where they provide new features to the existing product. This helps to provide better service at lower cost and is less risky. After developing the prototype of the new product or product extension, the marketing team conducts a survey. These data help the financial team to set the budgets and the operations team to organize the supply chain, which helps to reduce the price further(Hill and Jones, 2009).

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The flexibility of the products and the taste of the Kellogg’s products attract many customers and help to compete in the market. The brand loyalty and the super-market shelf space of Kellogg’s helped to hinder the potential for new market entries and hence to reduce the competition for many years. But later due to replacement of cereals with other foods like muffins and entries of powerful discounters like Walmart significantly challenged Kellogg’s market. Hence Kellogg’s faced a difficulty in capturing market and had to cut off their prices. But it seldom helped to regain the market. Later Kellogg’s regained their market share through product extensions. The products like Special K are sold extensively despite of its high price. The company achieved this through the awareness programs and participation in many debates about the balanced nutrition. These helped to attract the health conscious consumers and helped to compete in the market. This shows that Kellogg’s tries to learn from their failures(Hill and Jones, 2009).

2.3) Supply Chain Management and Price

Kellogg’s plans the supply chain to reduce the cost of production. Kellogg Company collaborates with certain transportation organisations like TDG, which helps to reduce the transportation charges. They locate their manufacturing units near to their suppliers and distributors in order to reduce the transportation charges and time of delivery. They maintain a good relationship between the organisations and their distributors and manage the stock through the use of information technologies. This helps to maintain a good communication and help them in a timely delivery of their products. Hence the products of Kellogg’s are easily available in the market, which helps maintain the market share constant(Kellogg’s, 2012).

The market research showed that while choosing cereals the consumers gives much importance for taste. They prefer for a healthy and tasty cereal. This made them develop new tastier products of All-Bran like Bran Flakes Yoghurty. To avoid confusion, they clearly mention the description of the product in package(Stokes and Lomax, 2008). The extensive research and innovation in Kellogg’s helps them to maintain the sales in spite of the rise in price of the inputs. The new product development, product extensions and use of newer technologies also contribute to this.

Conclusion and Recommendations

Kellogg Company is one of the leaders in the cereals market. They have wide range of high quality and tasty products, which help them to maintain the market constant. This also makes the company confident about their customers. The marketing team of the company carries out extensive market research and the data generated is analysed by the operations management team in order to design and develop the products to meet these customer needs. The designed product’s prototype is manufactured and another survey is done on the prototype get the feedback. Based on the feedback, the company set the budget of the company and designs the supply chain and the production.

The main objective of the company is to develop product of extreme quality and taste. The other operational objectives include timely delivery of the products, training and educating the employees to deliver high quality, maintaining the corporate responsibility, simplifying the process and maintain good relationships and communications. To maintain the quality, extensive quality control process is in place which checks the quality of the raw materials, in process products, final products and also the packaged products are checked for the freshness. They create awareness about balanced diet and healthy breakfast, which helps them acquire the health conscious consumers. The simplification of the process like automation in manufacturing units and computerised stocking and inventories helps in faster production and distribution. The computerised stocking helps them to monitor the availability of the products in the tertiary sectors.

The company also supports and compliments the innovation. They congratulate the employees for the innovative ideas and supports their growth. They value the employees and provide them positive and vitalising environment, which helps them to deliver excellent quality products.The company also maintain good internal relationship, wherein everyone concerned with the issue is allowed to participate in the discussions and decision making. This helps them to be accountable and solve the issues at the earliest.The supply chain is managed effectively so that the quality is consistent and helps to reduce the cost of production. The good relationships with transportation companies helps them to reduce the cost of transport.

However the price of the Kellogg’s still affect the price-sensitive consumers. This will significantly affect U. S. market due to the slowdown of U. S. economy. This can be overcome with extensive research and development of new products at a lower cost. Acquiring of the competitors which possess a good market share can also help them to increase the customer. Acquiring the competitors can help them acquire the market already possessed by the competitors.

The automation in the large scale manufacturing units help them reduce the cost while manufacturing for multiple orders. But this can lead to wastage while manufacturing for individual orders. This can be avoided through a control in the automation process while taking up the individual orders. As a future prospective, they can also plan for technologies reducing energy consumption during the process, reducing the cost of production.


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